COMEX gold was trading at $4,004 per ounce, down 0.04%, while COMEX silver fell 1.06% to $57.355 per ounce in early trade.
The precious metals market remained cautious after US President Donald Trump announced the reinstatement of a blockade on Iranian shipping in the Gulf and proposed a 20% fee on cargo moving through the Strait of Hormuz.
The developments pushed Brent crude oil to a one-month high, raising concerns about higher inflation globally.
At the same time, markets turned more cautious after US Federal Reserve Governor Christopher Waller indicated that the central bank may need to raise interest rates if inflation remains above its 2% target. Higher interest rates typically reduce the appeal of non-yielding assets such as gold.
Investors are now awaiting the release of the US Consumer Price Index (CPI) data later in the day, along with testimony from Federal Reserve Chair Kevin Warsh before Congress. The data could offer fresh clues on the Fed’s interest rate path, which is a key driver of gold prices.
According to market pricing, traders have increased expectations of a 25-basis-point Fed rate hike at the July 28-29 policy meeting. Rising Treasury yields and a stronger US dollar also weighed on bullion prices.
Why gold prices are under pressure
Gold is generally considered a safe-haven asset during periods of geopolitical uncertainty. However, expectations of higher US interest rates tend to offset that support by increasing the opportunity cost of holding bullion.
Analysts said the market is currently balancing two opposing forces:
Escalating tensions in the West Asia, which support safe-haven demand.
Expectations of tighter US monetary policy, which pressure gold prices through higher bond yields and a stronger dollar.
Silver, which has both precious metal and industrial demand, came under sharper selling pressure than gold, falling more than 1%.
Market participants will closely track the US inflation print and further developments in the US-Iran conflict, as both are likely to determine the near-term direction of gold and silver prices.
-With Reuters inputs
